Bill Gross; U.S. debt = INFLATION

Dollar depreciation will sap the purchasing power of U.S. consumers, as well as the global valuation of dollar denominated assets. Unique amongst almost all other global citizens, Americans are ignorant of the merits (and the negatives) of currency depreciation. Unless they are smacked with the reality of an expensive hotel or a meal in a foreign port of call during summer vacation, we have few... [more]

Dollar depreciation will sap the purchasing power of U.S. consumers, as well as the global valuation of dollar denominated assets. Unique amongst almost all other global citizens, Americans are ignorant of the merits (and the negatives) of currency depreciation. Unless they are smacked with the reality of an expensive hotel or a meal in a foreign port of call during summer vacation, we have few concerns when the dollar depreciates against a basket of foreign currencies. If our stock market goes up 10% annually in dollar-denominated terms, we assume we are 10% richer even if the dollar sinks at the same time. If the cost of imported goods and especially gasoline goes up more than our paychecks, we blame it on a political conspiracy. The fact is that annual budget deficits in the trillions of dollars add a like amount to the stock of outstanding dollars, resulting in currency depreciation, higher import inflation, and a degradation of dollar based assets in global financial markets. We become less, not more wealthy, losing our heads while we “hold on firmly and go on with (our) business”! http://www.pimco.com/Pages/OffWithOurHeads.aspx [less]